Wednesday, October 05, 2016

The Price Of Quality?: Holidays 2017

The price of Mallorcan holidays is going up. Or so it seems. You can judge only so much from social network comments, but when you learn of increases for packages that involve unremarkable accommodation which are anything from 300 to 2,000 euros more expensive in 2017, then the body of evidence begins to fill.

A reaction to this is that it's all to do with the UK's peculiar circumstances. Such a reaction is, however, conditioned by having a one-eyed view that it is the UK market which matters and no other. There are other markets. In June, the German media were pointing to higher prices for "Mallorca-Urlaub" in 2017.

So what's going on? It's pretty simple. There's a perfect storm driving prices up. Hoteliers upping prices. Tour operators falling over backwards to pay these prices in order to gobble up all available hotel space. (These tour operators do not, incidentally, include Spanish ones who are being totally outgunned and are struggling to find space.) These are the same tour operators which have taken hits this year not because of Mallorca or Spain but because of the well-publicised troubles elsewhere.

We've known about the hoteliers' price rises for several months. Depending on the chain or indeed the hotel, there are average increases of 15%. These rises, the hoteliers will and do argue, are the result of all their investment and hard work in renovation and upping the quality. Consequently, they can talk confidently of improved "price-quality" ratios for the punters. They can talk, but the punters don't automatically see it the same way. The tourist satisfaction survey by Gadeso in the summer indicated that this ratio has not improved. Punters are themselves being conditioned by quality expectations. Some have experienced them first hand in rival destinations. Quality of a similar or higher level and at a lower price. There's your price-quality ratio.

Until the bonanza of the past couple of years, served on a plate by the "troubles" of others, the hoteliers had been moaning about a decade or more of profits having barely increased. They had been running to stand still, such were the economics of the Mallorcan tourism market. Finally, a window opened, and up went the prices. And they are continuing to rise. In some instances by substantial amounts.

There are then hoteliers who insist that the elevated prices are the work of the tour operators. Maybe, but when the hoteliers have negotiated higher prices, what are the tour operators expected to do? Put the price down? It is troubling, though, to learn that major tour operators have been holding back on paying hoteliers' invoices this summer. The only reason that can be offered is the knock-on negative effect on tour operator business from cancellations to the troubled regions. Has Mallorca, therefore, been eyed up as one of the destinations where losses this year can be recouped next year?

One of the great ironies of all this, and again one can find evidence of this on social networks, is that punters, rather than abandoning Mallorca for other shores, are opting for a change. Which means private rentals. So, the hotels put their prices up and drive the client base into the hands of the enemy and into the devil's work that is Airbnb. A crunch may come, where the punter is concerned, when the enemy seeks to profiteer and ups its prices by a few hundred euros.

A further irony may just be that the hoteliers end up doing the regional government's work for them. The government sees price engineering (the tourist tax) as a means of keeping a lid on tourist numbers. The hoteliers are thus, if they're not careful, engaging in the same tactic. There will always be a further argument, one with some justification, that other destinations don't have the capacity that Mallorca has. Another argument is that the holiday is a "necessity". Price matters only so much. Capacity or price, eventually something has to give.

While the UK market does indeed have its peculiarities, so also do other markets. If one ever delves into those tourist spending stats, what one finds is the way in which spending varies significantly across markets. It's not because the Swedes, Norwegians (or even more so, the Russians) are handing out more folding notes in the island's bars and restaurants, it's because the average cost of the actual holidays is way higher than a British holiday: it can range from 25% to 50% more. And none of these other markets will be immune from the scramble for hotel places and the consequent increases.

Celesti Alomar, the tourism minister responsible for the first ecotax, said of that tax that it was a means of Mallorca not engaging in a price war with cheap destinations. Quality was all, and that meant higher prices. He seems to finally be getting his wish.

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